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Resource centre on India's rural distress
 
 

Shackled by timidity-Yoginder K Alagh
-The Indian Express
 
Time to take the bolder steps, bring FDI to small towns

When the GDP falls below 7 per cent, we need to start worrying. When it is less than 6 per cent, we must treat it as a crisis situation. Growth models show that the robust investment rates already achieved, and twice the productivity growth achieved in the 1980s and ’90s, will get us 8 per cent growth. This also needed a focused savings and efficiency strategy, and a greater volume of trade. The current situation requires a policy agenda that must be pursued with dedication if growth rates are to be restored.

This is no time to start wringing our hands. It is upsetting when C. Rangarajan, chairman of the Prime Minister’s Economic Advisory Council (PMEAC), says there is no further fiscal space. A practical policy does not involve non-negotiable positions or choosing between two alternatives.

The art of policy is to present to the political leadership possibilities that it is forced to consider seriously. This is admittedly a difficult job in a multi-party coalition system where some of the netas in power are near-Luddites. Major reform entails the need to push investment. For example, FDI must be conceptualised in a way that makes an impact. As the Organisation for Economic Cooperation and Development shows, during recessions, everyone wants everybody else to follow open policies. But in the scramble to save jobs, inverted tariffs and non-tariff restrictions become the order of the day.

Fiscal and monetary space has to be created to push investment. While infrastructure investment is key, public-private partnerships also need public support. Particularly in small towns, PPPs will need a lot of hand-holding. Public initiative may well be needed if no one goes there. According to some, FDI retail in metros will lead to a surge in the growth rate. This is optimistic to the point of being funny. What will matter is if it is allowed in non-metro towns and smaller “Census Towns” where the farmer brings his produce. China did it. In Chinese Walmarts, some employees are dressed in uniform, but a number of farm women also appear to be selling their wares. When it comes to India, Walmart has said it is not very keen on retail in metros, but it is actually building facilities in district towns like Anand. Without marketing, communication and processing support, there is no chance of food inflation subsiding.

Seven years ago, there was a report saying that fertiliser prices should gradually be raised to keep pace with the improvement in terms of trade for agriculture, as measured by the Commission for Agriculture Costs and Prices. One fancy scheme followed another and all kinds of bizarre ideas were mooted, but no steps were taken towards the necessary reforms. We can start now.

From the mid-1970s, when the first energy crisis hit India, it was recognised that the cooking and fuel needs of the poor had to be protected, while trying to ensure that they did not cut down forests to meet their needs. Over the last 12 years, various reports, starting with those made by Vijay Kelkar and Kirit Parekh, have proposed a gas grid for the poor and the need to align fuel price with imported energy. The matter has gone from one committee to another, with no results. Meanwhile, there are reports of civil servants and journalists being murdered by the diesel mafia.

The list of areas in need of reform is endless — land, coal pricing and, most importantly, public investment. The need for infrastructure in towns where farmers sell their produce has never been more pressing. Initiatives helping them will be doubly blessed. There are companies that are making money out there. Five Rajasthan arhatias, beginning with just a few crores, have developed hundreds of crores worth of assets in storages and instruments based on stored commodities as financial collateral.

There are energies within the economy that are shackled by lethargy and inertia. They need to be unleashed. It is for economists and experts to design practical policies and for the political leadership to implement them. Clarity on such policies will help us start the journey out of the present crisis.

The writer, a former Union minister, is chairman, Institute of Rural Management, Anand